854 F.

2d 1264

TOWNE REALTY, INC., d/b/a Tri Realty, Inc., Plaintiff,

v.
SAFECO INSURANCE COMPANY OF AMERICA,
Defendant-Cross-Claim
Plaintiff-Appellant,
v.
LEXINGTON INSURANCE COMPANY, Commercial Union
Insurance Co.,
Defendants-Cross-Claim Defendants-Appellees.
No. 87-3420.

United States Court of Appeals,

Eleventh Circuit.
Sept. 14, 1988.

Roland A. Sutcliffe, Jr., Zimmerman, Shuffield, Kiser & Sutcliffe,

Orlando, Fla., for defendant-cross-claim plaintiff-appellant.
Terry D. Bork, Jacksonville, Fla., for Lexington.
W. Douglas Childs, Jacksonville, Fla., for Commercial Union.
Appeal from the United States District Court for the Middle District of
Florida.
Before KRAVITCH and CLARK, Circuit Judges, and NICHOLS* , Senior
Circuit Judge.
CLARK, Circuit Judge:

This appeal arises from a dispute between three insurance companies as to their
respective liability for a settlement agreement entered into by their insured,
Towne Realty, Inc. ("Towne"), and an injured third party. Towne brought a
diversity action against the three insurers--Safeco Insurance Co. of America
("Safeco"), Commercial Union Insurance Co. ("Commercial Union"), and

Lexington Insurance Co. ("Lexington")--to resolve the dispute, and the district
court held that Safeco exclusively was liable. Safeco appealed, and we reverse.
2

On December 27, 1980, Charles L. Stephens was beaten and severely injured
while delivering newspapers at the Villa Armada Apartments. The apartments
were owned by a joint venture consisting of three individuals ("the Owners")
and were managed by Towne. To recover for his injuries, Stephens and his wife
brought a state court suit against both the Owners and Towne.

At the time of the attack on Stephens, both the Owners and Towne were insured
by Safeco. The Safeco policy provided $1,000,000 of coverage for liability
arising out of the ownership and management of the apartments. Towne was
additionally covered by policies issued by Commercial Union and Lexington.
The Commercial Union policy provided $500,000 in liability coverage for
properties owned or managed by Towne throughout the country. Towne would
periodically add and delete properties to the policy, and at the end of the year
the premium would be recalculated based on the additions and deletions. The
Lexington policy also provided $500,000 in liability coverage for Towne's
various properties, but it had no reporting requirements and a flat premium.

All three policies included "other insurance" clauses limiting the insurers'
liability for a particular loss if other insurance applied. Commercial Union's
policy included the following language:

5 insurance afforded by this policy is primary insurance, except when stated to

The
apply in excess of or contingent upon the absence of other insurance. When this
insurance is primary and the insured has other insurance which is stated to be
applicable to the loss on an excess or contingent basis, the amount of the Company's
liability under this policy shall not be reduced by the existence of such other
insurance.
6
When
both this insurance and other insurance apply to the loss on the same basis,
whether primary, excess or contingent, the Company shall not be liable under this
policy for a greater proportion of the loss than that stated in the applicable
contribution provision below:
7

(a) Contribution by Equal Shares. If all of such other valid and collectible
insurance provides for contribution by equal shares, the Company shall not be
liable for a greater proportion of such loss than would be payable if each
insurer contributes an equal share until the share of each insurer equals the
lowest applicable limit of liability under any one policy or the full amount of
the loss is paid, and with respect to any amount of loss not so paid the

remaining insurers then continue to contribute equal shares of the remaining

amount of the loss until each such insurer has paid its limit in full or the full
amount of the loss is paid.
8

(b) Contribution by Limits. If any of such other insurance does not provide for
contribution by equal shares, the Company shall not be liable for a greater
proportion of such loss than the applicable limit of liability under this policy for
such loss bears to the total applicable limit of liability of all valid and
collectible insurance against such loss.

Record, Vol. I, Tab 13, Exh. D at 11. Safeco's "other insurance" provision
stated:

10applicable to the loss, there is any valid and collectible insurance, whether on a
If
primary, excess or contingent basis, available to the insured (by this or any other
carrier), there shall be no insurance afforded hereunder as respects such loss, except,
that if the applicable limit of liability of this policy is in excess of the applicable
limit of liability provided by the other insurance, this policy shall afford excess
insurance over and above such other insurance in an amount sufficient to afford the
insured a combined limit of liability equal to the applicable limit of liability afforded
by this policy. Insurance under this policy shall not be construed to be concurrent or
contributing with any other insurance which is available to the insured.
11

Id., Exh. B at 37. Lexington's policy read as follows:

12other collectible insurance with any other insurer is available to the Insured
If
covering a loss also covered hereunder, this insurance shall be in excess of, and shall
not contribute with such other insurance. Excess insurance over the limits of liability
expressed in this policy is permitted without prejudice to this insurance and the
existence of such insurance shall not reduce any liability under this policy.
13

Id., Exh. C at 17.

14

After the Stephens filed suit, Safeco assumed the defense of both Owners and
Towne. When it appeared that Towne might be found liable for an amount in
excess of its coverage, Safeco began seeking contribution from Commercial
Union and Lexington for the purpose of settling with the Stephens. It was
ultimately agreed that Safeco would contribute $500,000 and Commercial
Union $500,000 to a $1,000,000 settlement. This agreement was subject to two
conditions. First, the insurers would file a declaratory judgment action to
determine which insurer was primarily responsible for Towne's liability.
Second, if it was determined that Safeco was not primarily responsible for

Towne's liability, the issue of the proportional liability of the Owners1 and
Towne would be submitted to arbitration.
15

Two lawsuits followed. In the first, Towne sought a declaratory judgment

concerning the responsibility of each of the insurers. In the second, Safeco
sought a declaratory judgment that Commercial Union and Lexington were
responsible. The district court consolidated the suits and the parties stipulated
that there was no genuine issue of material fact precluding summary judgment.
The court held that because the Commercial Union, Lexington, and Safeco
policies all covered the same property and were purchased within five days of
one another, there was a latent ambiguity regarding primary responsibility that
justified the consideration of parol evidence on the contracting parties' intent.
After considering that evidence, specifically the testimony of the agent who
sold the Owners the Safeco policy and the Towne official who purchased the
Commercial Union policy, the court concluded that the parties intended the
Safeco policy to afford the primary coverage.

16

We cannot accept the district court's reasoning in this regard. Although Florida
law allows courts to consider parol evidence in determining the parties' intent if
a guaranty contract is truly ambiguous, see, e.g., Ace Electric Supply Co. v.
Terra Nova Electric Co., 288 So.2d 544, 547 (Fla.Dist.Ct.App.1973), there is
no support for the proposition that mere concurrent execution of insurance
policies creates an ambiguity as to which insurer is primarily liable. Indeed,
Florida law is quite clear that the parties' intent is to be measured solely by the
language of the policies unless the language is ambiguous. See Durham
Tropical Land Corp. v. Sun Garden Sales Co., 106 Fla. 429, 138 So. 21, 23
(1931) ("The intent of the parties to a contract is to be deduced from language
employed, and such intention, when expressed, is controlling, regardless of
intention existing in the minds of parties."); Hurley v. Werly, 203 So.2d 530,
537-38 (Fla.Dist.Ct.App.1967). Thus, to conclude from the mere fact that
policies were entered into at approximately the same time that primary liability
is uncertain is essentially to rely on parol evidence to justify the consideration
of parol evidence, a circular form of reasoning we do not believe the Florida
courts would accept. Cf. Continental Casualty Co. v. Weekes, 74 So.2d 367,
368 (Fla.1954) (to arbitrarily assign primary liability to an insurer and then find
that a policy clause negating primary liability is inconsistent is improper
circular reasoning).

17

This leaves us to examine the language of the Commercial Union, Lexington,

and Safeco policies to determine whether the policies are ambiguous or
conflicting with respect to the order of coverage. At least with respect to
primary responsibility, it is clear that they are not. Commercial Union's policy

states flatly that it extends "primary insurance" to the insured unless other parts
of the policy state otherwise, and nowhere in the policy is there any other
language calling Commercial Union's "primary" status into question. The
Commercial Union policy also states that the insurer will remain primarily
liable if the only other insurance applicable to the loss is "on an excess or
contingent basis." In contrast to the Commercial Union policy, neither Safeco's
nor Lexington's policy states that it is "primary insurance." To the contrary,
Safeco's policy states that its coverage is contingent on the absence of other
applicable insurance of any kind, except to the extent that the total liability
facing the insured exceeds the combined coverage limits of all of the other
insurance. The Florida courts have, on several occasions, recognized that this
type of "escape clause" generally precludes any finding that an insurer is
primarily liable if there is other collectible insurance. See Continental Casualty
Co. v. Weekes, 74 So.2d at 369; Calder Race Course, Inc. v. Hialeah Race
Course, Inc., 389 So.2d 215, 216 (Fla.Dist.Ct.App.1980); see also World Renta-Car v. Stauffer, 306 So.2d 131, 132 (Fla.Dist.Ct.App.1974). Likewise,
Lexington's policy makes clear that it is an umbrella liability policy and
extends only excess coverage if there is other collectible insurance. Thus,
Commercial Union is primarily responsible, up to the $500,000 limit of its
policy, for Towne's settlement with the Stephens.
18

The district court's alternative holding, that Safeco was primarily liable because
its policy afforded "specific" coverage whereas Commercial Union's policy was
of a "blanket" or "floating" nature,2 does not alter our conclusion. For although
it is true that the Florida courts have on occasion invoked this distinction,3 they
have never done so when a policy unambiguously stated that the coverage
extended was primary or when third-party liability was involved. See Sucher v.
Utica Mutual Insurance Co., 238 So.2d 687 (Fla.Dist.Ct.App.1970); Morgan v.
Badger Mutual Insurance Co., 192 F.Supp. 249 (N.D.Fla.1961), aff'd, 313 F.2d
783 (5th Cir.1963); Balogh v. Jewelers Mutual Insurance Co., 167 F.Supp. 763
(S.D.Fla.1958), aff'd, 272 F.2d 889 (5th Cir.1959). It thus appears that the
distinction is useful only when payments directly to an insured are involved 4
and when neither of two policies is clearly intended to be primary, an
uncertainty not present here simply because Commercial Union chose to state
clearly that it was affording primary coverage. Accordingly, Commercial
Union is primarily liable. To hold otherwise would be to allow the insurer to
avoid its express obligation in favor of some abstraction concerning the various
types of insurance involved, a result we are convinced the Florida courts would
not accept.

19

Having determined that Commercial Union is primarily responsible for

Towne's liability, we must now decide which insurer is responsible for the

remaining $500,000. As indicated above, Safeco's policy included what is

commonly known as an "escape clause," stating that no coverage is extended
unless and until all other collectible insurance has been exhausted. Lexington's
policy extended umbrella liability coverage and contained what is commonly
known as an "excess clause," stating that if other collectible insurance is
available, Lexington is responsible only for any amount of liability in excess of
the other insurers' coverage. A conflict arises because it would appear that each
policy could serve as "other collectible insurance" sufficient to trigger the
other's "other insurance" provision.
20

A recent Florida Supreme Court case, however, resolves the conflict. In

Allstate Insurance Co. v. Executive Car & Truck Leasing, Inc., 494 So.2d 487
(Fla.1986), the court recognized that umbrella policies stand on a different
footing when two "other insurance" clauses are in conflict. The court held that "
'umbrella coverages ... are regarded as true excess over and above any type of
primary coverage, excess provisions arising in regular policies in any manner,
or escape clauses.' "5 Id. at 489 (quoting J. Appleman, Insurance Law and
Practice Sec. 4909.85 (1981)) (emphasis added). Because Lexington's policy
was, by its terms, an umbrella liability policy, see Record, Vol. I, Exh. C at 1,
Safeco's coverage must be extended first.

21

The district court's judgment that Safeco was exclusively responsible for
Towne's liability is reversed, and the case is remanded for entry of judgment
naming Commercial Union as the primary insurer and Safeco as the secondary
insurer.

22

REVERSED and REMANDED.

Honorable Philip Nichols, Jr., Senior U.S. Circuit Judge for the Federal Circuit,
sitting by designation

This case does not involve the insurers' responsibility for the Owners' liability,
as it is undisputed that the Owners were insured only by Safeco

According to the court in Sucher v. Utica Mutual Insurance Co., 238 So.2d 687
(Fla.Dist.Ct.App.1970), " '[a] specific policy covers specific property, at a
specific location for a specific amount and for a specific premium.' " Id. at 689
(quoting Morgan v. Badger Mutual Insurance Co., 192 F.Supp. 249, 251
(N.D.Fla.1961), aff'd, 313 F.2d 783 (5th Cir.1963)). A floating policy is,
presumably, a policy in which one or more of these elements is missing. See
Morgan, 192 F.Supp. at 251-52 (policies covering inventory that varied in

quantity throughout the covered period were "classically floater type policies").
In light of our disposition of this issue, we express no opinion as to whether
Commercial Union's policy could properly be classified as a blanket or floating
policy
3

Contrary to Commercial Union's assertion, the court in State Farm Mutual

Automobile Insurance Co. v. Universal Atlas Cement Co., 406 So.2d 1184
(Fla.Dist.Ct.App.1981), did not invoke the specific/floating distinction. The
court's result turned on the fact that one of the two conflicting policies was an
umbrella liability policy, extending coverage that was intended from the
beginning to be excess. See id. at 1187. Umbrella coverage is not identical to
floating coverage: it is entirely possible to have an umbrella policy that is
nonetheless specific

Common sense suggests the reason for this limitation on the specific/floating
distinction. How can a policy be specific with respect to compensation of an
unknown third party?

Insofar as this passage addresses escape clauses and yet the case apparently did
not involve any escape clauses, the statement is a dictum. Even so, when
considering a diversity case under state law, we are bound to decide the case
the way it appears the state's highest court would, and we would be violating
that duty to ignore the fact that this statement was made